COVID-19 (Temporary Measures) Act Enhanced to Extend Relief to an Inability to Vacate Business Premises and to Cap Late Payment Interest and Charges

30 JUL 2020

30 Jul 2020 Posted in Press releases

  1. Amendments to the COVID-19 (Temporary Measures) Act ("Act"), as well as related subsidiary legislation, will come into force on 31 July 2020. In addition to operationalising the rental relief framework that was announced in Parliament on 5 June 2020, the amendments enhance the existing protections for businesses and individuals who are unable to perform their contractual obligations due to COVID-19, in the following ways:

    a. Limiting the liability of tenants who are unable to vacate their business premises due to COVID-19; and

    b. Limiting the amount of late payment interest and charges that can be charged for arrears arising under specific contracts.
  1. Once a Notification for Relief is served, these reliefs will apply for the prescribed period under the Act, which is currently until 19 October 2020.

(A) Relief for tenants unable to vacate business premises due to COVID-19

  1. Due to COVID-19, some tenants have been unable to vacate their business premises after the expiry of their lease or licence. For example, the lease or licence may have expired during the Circuit Breaker or they may not have been able to procure movers. Under existing law, these tenants may incur significant liabilities (such as double rent) for "holding over", even though their failure to vacate arose through no fault of their own.
  1. Tenants who qualify for relief will not have to pay double rent, but the prescribed rate. The qualifying criteria are:

    a. The tenant must be a lessee or licensee of a non-residential (e.g. commercial, or industrial) property;

    b. The lease or licence must have been –
    i. entered into or renewed before 25 March 2020; or
    ii. originally entered into before 25 March 2020, and renewed automatically or in exercise of a right of renewal on or after 25 March 2020;

    c. The lease or licence expired, or was terminated, on or after 1 February 2020;

    d. The tenant was unable to vacate the premises due to COVID-19; and

    e. The tenant could not have avoided the holding over by taking reasonable steps. Examples of reasonable steps include: contacting at least one moving company or making good efforts to independently engage workers to help with vacating the premises.
  1. Upon serving a Notification for Relief under the Act, qualifying tenants will be liable only for the amounts listed in the table below. The amount that the qualifying tenant has to pay depends on the period in which the tenant was unable to vacate the premises, as well as whether the tenant operated its business on the premises during the holding over period. An explanation of when a tenant is considered to be operating its business on the premises is set out in Annex A.

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(B) Cap on late payment interest and charges for specific contracts

  1. The Act has also been enhanced to limit the amount of late payment interest and charges that can be charged for arrears under certain categories of prescribed contracts.
  1. This is intended to help businesses affected by COVID-19 to manage their debt load and facilitate a quicker eventual recovery.
  1. A cap has been set at an amount equal to 5% per annum of simple interest on the arrears. This complements the existing temporary moratorium from enforcement actions under the Act, by limiting the late payment interest and charges that may accrue during the moratorium.
  1. This relief applies to the following categories of contracts under the Act:

    a. Hire-purchase and conditional sales agreements of:
    i. A plant, machinery or fixed asset in Singapore that is used for manufacturing, production or other business purposes; or
    ii. A commercial vehicle,
    except where such agreement is with a bank or finance company;6

    b. Rental agreements for:
    i. A plant, machinery or fixed asset in Singapore that is used for manufacturing, production or other business purposes; or
    ii. A commercial vehicle (excluding taxis and private-hire cars);

    c. Sale and purchase agreements or agreements for lease for residential properties sold by housing developers;

    d. Construction contracts or supply contracts; and

    e. Event or tourism-related contracts.
  1. Upon serving a Notification for Relief under the Act, the late payment interest and charges that are chargeable on arrears that accrued between 1 February and 19 October 2020 will be capped at the amount equal to 5% per annum of simple interest on the arrears. Where the amount of late payment interest and charges under the contract does not exceed the capped amount, the debtor will continue to be liable for the contractual amount. A worked example has been set out in Annex B.

MINISTRY OF LAW
30 JULY 2020

1. If the tenant operated its business for part of this period only, the amount payable will be pro-rated accordingly. For example, if the tenant held over from 7 April 2020 to 18 June 2020, and operated from 7 April 2020 to 30 April 2020, the tenant will be liable to pay (a) the amount set out in S/N 2 for the period from 7 April 2020 to 30 April 2020, and (b) the amount set out in S/N 1 for the period from 1 May 2020 to 18 June 2020.

2. “Rent” is the amount payable for the lease or licence of the property, and includes all service, maintenance and utilities charges. The amounts are to be calculated based on the last rent payable by the tenant under its lease or licence.

3. Please see footnote 2 for the meaning of “rent”.

4. Similar to footnote 1, if the tenant operated its business for part of this period only, the amount payable will be pro-rated accordingly. For example, if the tenant held over from 19 June 2020 to 18 August 2020, and operated from 19 June to 18 July 2020, the tenant will be liable to pay (a) the amount set out in S/N 4 for the period from 19 June 2020 to 18 July 2020, and (b) the amount set out in S/N 3 for the period from 19 July 2020 to 18 August 2020.

5. Please see footnote 2 for the meaning of “rent”.

6. Such contracts were excluded because banks and finance companies, working with the Monetary Authority of Singapore, have already adopted a series of voluntary relief measures for individuals and businesses. ↩

Annex A: Operation of the Business on the Premises (109KB)
Annex B: Worked Example of Cap on Late Payment Interest and Charges (115KB)

Last updated on 30 Jul 2020